LL FLOORING HOLDINGS, INC. 
By TOANO, Va., Feb. 19, 2014 /PRNewswire/ -- Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the fourth quarter and full year ended December 31, 2013, as well as its updated outlook for 2014.
(Logo: http://photos.prnewswire.com/prnh/20130604/MM25930LOGO )
Fourth Quarter Results
Net sales increased $47.8 million, or 22.7%, to $258.4 million in the fourth quarter of 2013 from $210.7 million in the fourth quarter of 2012. Comparable store net sales increased 15.6% for the quarter, driven by an 8.6% increase in the number of customers invoiced and a 7.0% increase in the average sale. Non-comparable store net sales increased $14.9 million over the prior year period. As of December 31, 2013, the Company operated 318 stores, including 11 stores opened during the fourth quarter of 2013, for a total of 30 stores opened during the year. The Company also remodeled 22 existing stores during the year.
Gross margin was 40.8% in the fourth quarter of 2013 compared to 39.1% in the fourth quarter of 2012. The increase in gross margin reflects generally lower net product costs partially offset by higher transportation and other costs. Transportation costs in the fourth quarter of 2013 included certain costs related to the new West Coast distribution center, which is expected to be fully operational in the first quarter of 2014.
Selling, general and administrative ("SG&A") expenses increased as a percentage of net sales to 27.6% for the fourth quarter of 2013 compared to 27.4% for the fourth quarter of 2012. SG&A expenses in the fourth quarter of 2013 included costs of approximately $1.7 million, primarily related to the start-up of the West Coast distribution center and certain incremental legal and professional fees.
Operating margin increased 170 basis points to 13.3% in the fourth quarter of 2013, from 11.6% in the fourth quarter of 2012.
Net income increased 50.6% to $20.8 million, or $0.74 per diluted share, in the fourth quarter of 2013 from $13.8 million, or $0.50 per diluted share, in the fourth quarter of the prior year. The Company's effective tax rate was 39.3% for the fourth quarter of 2013, compared to an effective tax rate of 43.7% in the fourth quarter of 2012.
Cash and cash equivalents at December 31, 2013 totaled $80.6 million compared with $64.2 million at December 31, 2012.
Robert M. Lynch, President and Chief Executive Officer, commented, "We achieved record highs for net sales and operating margin in the fourth quarter as we continued to gain share in a highly fragmented market. We gained further traction in our key, multi-year strategic initiatives while continuing to deliver value and legendary service to each customer. Customer demand was inconsistent during the quarter, with certain regions of the country periodically impacted by difficult weather conditions. Nevertheless, our store team, with support across the organization, delivered an unprecedented level of individualized customer service and focus on operating results. I could not be more proud of this team as we crossed the milestone of $1.0 billion in annual net sales in 2013, and the results we have achieved throughout the year are a direct reflection of the commitment and efforts of our team. This was a year of significant accomplishments by our team, and we believe that our intense focus, unified vision and coordinated efforts set the foundation for an exciting 2014."
Full Year Results
Net sales increased 23.0% to $1.0 billion in 2013 from $813.3 million in 2012, as comparable store net sales increased 15.8%, or $128.2 million, and non-comparable store net sales increased $58.7 million.
Gross margin increased to 41.1% in 2013 compared to 38.0% in the prior year. SG&A expenses increased as a percentage of net sales to 28.5% in 2013, compared to 28.3% in 2012.
Operating margin increased 300 basis points to 12.6% in 2013 from 9.6% in 2012.
Net income increased 64.4% to $77.4 million, or $2.77 per diluted share, in 2013 compared to $47.1 million, or $1.68 per diluted share, in the prior year. The Company's effective tax rate was 38.8% for 2013 compared to an effective tax rate of 40.0% in 2012.
Share Repurchase Program
Lumber Liquidators also announced today that its Board of Directors has authorized the repurchase of an additional $50 million of its common stock. The repurchases will be subject to market conditions and other factors and will be made from time to time through open market purchases or through privately negotiated transactions.
Company Outlook
In 2014, as previously announced, the Company expects to achieve the following for the full year:
-- Net sales in the range of $1.15 billion to $1.20 billion.
-- Comparable store net sales increasing in the high single to low-double
digits.
-- The opening of a total of 30 to 40 new store locations and remodeling of
a total of 25 to 35 existing stores, all in the store of the future
format.
-- Capital expenditures between $80 million and $90 million, including up
to $50 million for supply chain investments.
-- De-leverage of SG&A expenses primarily related to store base expansion,
advertising expenses increasing at a rate greater than net sales, the
opening and continuing operation of the West Coast distribution center
and higher than normal legal and professional fees.
-- Operating margin expansion to a range of 13.0% to 13.8%.
-- Earnings per diluted share in the range of approximately $3.25 to $3.60,
based on a diluted share count of approximately 28.1 million shares,
which is exclusive of any future impact of the stock repurchase program.
Mr. Lynch concluded, "We are looking forward to another great year as we continue to roll out the store of the future format to both new and existing stores and implement enhancements to our supply chain. To support our continuing growth, our planned capital investment in 2014 will be the largest in our history. We are pleased that we can make this investment in our business while also returning value to our long-term shareholders through our expanded share repurchase authorization. The first quarter of 2014 to date has been disrupted by unseasonably harsh weather across much of the country, but the important spring remodeling season is in front of us. Our team is focused to deliver growth this year, and our industry-leading value proposition is stronger than ever. We continue to invest in the quality of an expanding assortment of products more readily available to meet our customers' needs. Most important is our commitment and continuing investment in our people. Led by our flooring experts, we plan to reach an even broader customer base and capture additional share to drive long-term growth and operating margin expansion in 2014 and for years to come."
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast today, February 19, 2014, at 10:00 a.m. Eastern Time. The conference may be accessed by dialing (877) 407-9039 or (201) 689-8470. A replay will be available approximately two hours after the call ends through February 26, 2014 and may be accessed by dialing (877) 870-5176 or (858) 384-5517 and entering pin number 13575534. The live conference call and replay may also be accessed via audio webcast at the Investor Relations section of the Company's website, www.lumberliquidators.com.
KeyBanc Consumer Conference
The Company today also announced that Mr. Lynch and Daniel E. Terrell, Chief Financial Officer, will participate in the KeyBanc's Consumer Conference in New York City on February 26, 2014. Mr. Lynch and Mr. Terrell will be meeting with investors throughout the day.
About Lumber Liquidators
In its 20th year and with more than 320 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 340 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and resilient vinyl. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators' low priced product, much of which is in-stock and ready for delivery.
With premier brands including Bellawood Prefinished Hardwood and Morning Star Bamboo, Lumber Liquidators' flooring is often featured on popular television shows such as HGTV's Dream Home and This Old House.
For more information, please visit www.LumberLiquidators.com or call 1.800.HARDWOOD. You can also follow the company on Facebook and Twitter, and learn more about its corporate giving program at LayItForward.LumberLiquidators.com.
Forward-Looking Statements
This press release and accompanying financial tables may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act. These statements are based on currently available information as of the date of such statements and are subject to risks and uncertainties that may cause actual results to differ. The Company specifically disclaims any obligation to update these statements which speak only as of their respective dates, except as may be required under the federal securities laws. Information regarding these additional risks and uncertainties is contained in the Company's filings with the Securities and Exchange Commission.
For further information contact:
Lumber Liquidators Investor Relations
Ashleigh McDermott
Tel: 757.566.7512
(Tables Follow)
Lumber Liquidators Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
December 31,
------------
2013 2012
---- ----
Assets
Current Assets:
Cash and Cash Equivalents $80,634 $64,167
Merchandise Inventories 252,428 206,704
Prepaid Expenses 6,229 5,168
Other Current Assets 12,916 12,106
------ ------
Total Current Assets 352,207 288,145
Property and Equipment, net 65,947 47,764
Goodwill 9,693 9,693
Other Assets 1,712 1,785
----- -----
Total Assets $429,559 $347,387
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $56,327 $55,110
Customer Deposits and Store
Credits 22,377 25,747
Accrued Compensation 11,709 7,969
Sales and Income Tax Liabilities 4,878 4,314
Other Current Liabilities 11,709 7,887
------ -----
Total Current Liabilities 107,000 101,027
Deferred Rent 4,169 3,653
Deferred Tax Liability 9,061 8,166
Stockholders' Equity:
Common Stock ($0.001 par value;
35,000,000 authorized;
27,557,570 and 27,214,144
outstanding, respectively) 30 29
Treasury Stock, at cost
(2,133,307 and 1,719,706
shares, respectively) (85,382) (50,552)
Additional Capital 164,581 131,724
Retained Earnings 230,662 153,267
Accumulated Other Comprehensive
(Loss) Income (562) 73
---- ---
Total Stockholders' Equity 309,329 234,541
------- -------
Total Liabilities and
Stockholders' Equity $429,559 $347,387
======== ========
Lumber Liquidators Holdings, Inc.
Consolidated Statements of Income
(in thousands, except share data and per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2013 2012 2013 2012
---- ---- ---- ----
(unaudited)
Net
Sales $258,433 $210,655 $1,000,240 $813,327
Cost
of
Sales 152,902 128,373 589,257 504,542
------- ------- ------- -------
Gross
Profit 105,531 82,282 410,983 308,785
Selling,
General
and
Administrative
Expenses 71,270 57,800 284,960 230,439
------ ------ ------- -------
Operating
Income 34,261 24,482 126,023 78,346
Interest
and
Other
Income,
net (18) (40) (442) (140)
--- --- ---- ----
Income
Before
Income
Taxes 34,279 24,522 126,465 78,486
Provision
for
Income
Taxes 13,484 10,714 49,070 31,422
------ ------ ------ ------
Net
Income $20,795 $13,808 $77,395 $47,064
======= ======= ======= =======
Net
Income
per
Common
Share-
Basic $0.75 $0.51 $2.82 $1.71
===== ===== ===== =====
Net
Income
per
Common
Share-
Diluted $0.74 $0.50 $2.77 $1.68
===== ===== ===== =====
Weighted Average Common Shares
Outstanding:
Basic 27,592,651 27,240,235 27,484,790 27,448,333
Diluted 27,940,706 27,845,214 27,914,322 28,031,453
Lumber Liquidators Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December
31,
--------------------
2013 2012
---- ----
Cash Flows from Operating Activities:
Net Income $77,395 $47,064
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and
Amortization 11,666 9,957
Deferred Income Taxes (846) 160
Stock-Based Compensation
Expense 5,974 3,997
Changes in Operating Assets and Liabilities:
Merchandise Inventories (45,834) (42,712)
Accounts Payable (15) 16,756
Customer Deposits and Store
Credits (3,354) 7,626
Prepaid Expenses and Other
Current Assets (257) (2,835)
Other Assets and Liabilities 8,271 7,256
----- -----
Net Cash Provided by
Operating Activities 53,000 47,269
Cash Flows from Investing Activities:
Purchases of Property and
Equipment (28,585) (13,376)
------- -------
Net Cash Used in Investing
Activities (28,585) (13,376)
Cash Flows from Financing Activities:
Payments for Stock
Repurchases (34,830) (49,436)
Proceeds from the Exercise
of Stock Options 10,255 10,454
Excess Tax Benefit from
Stock-Based Compensation 17,132 7,131
------ -----
Net Cash Used in Financing
Activities (7,443) (31,851)
------ -------
Effect of Exchange Rates on
Cash and Cash Equivalents (505) 450
Net Increase in Cash and
Cash Equivalents 16,467 2,492
Cash and Cash Equivalents,
Beginning of Year 64,167 61,675
------ ------
Cash and Cash Equivalents,
End of Year $80,634 $64,167
======= =======
Lumber Liquidators Holdings, Inc.
Other Supporting Schedules
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2013 2012 2013 2012
---- ---- ---- ----
(dollars in thousands)
Net sales $258,433 $210,655 $1,000,240 $813,327
Percentage
increase 22.7% 20.8% 23.0% 19.3%
Number of
stores open at
end of period 318 288 318 288
Number of
stores opened
in period 11 4 30 25
percentage increase (decrease)
Average sale(1) 7.0% 3.9% 6.6% 2.5%
Average retail
price per unit
sold(2) 3.2% 2.2% 5.7% 0.2%
Comparable stores(3):
Net sales 15.6% 13.2% 15.8% 11.4%
Customers
invoiced4 8.6% 9.4% 9.2% 8.9%
Net sales of
stores
operating for
13 to 36
months 19.2% 19.7% 21.8% 23.3%
Net sales of
stores
operating for
more than 36
months 14.9% 12.5% 14.9% 9.1%
Net sales in
markets with
all stores
comparable (no
cannibalization) 18.9% 15.6% 18.2% 13.3%
Net sales in
cannibalized
markets5 42.7% 34.5% 45.2% 33.3%
___________________
1 Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer, measured on a monthly
basis and excluding transactions of less than $250 (which are generally sample orders, or add-ons or fill-ins to previous
orders) and of more than $30,000 (which are usually contractor orders)
2 Average retail price per unit sold is calculated on a total company basis and excludes certain non-merchandise revenue
3 A store is generally considered comparable on the first day of the thirteenth full calendar month after opening
4 Change in number of customers invoiced which is calculated by applying our average sale to total net sales at comparable stores
5 A cannibalized market has at least one comparable store and one non-comparable store
Our recent store of the
future activity is as
follows:
Three Months Year Ended
Ended December 31,
December 31, 2013
2013
----
Number of stores of the
future at beginning of
period 33 -
New stores of the future
opened during the
period 11 30
Stores of the future
remodeled during the
period 8 22
--- ---
Number of stores of the
future at December 31 52 52
=== ===
The significant drivers of gross margin expansion and their estimated impact compared to the prior year are as follows:
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
Driver Description 2013 2012(1) 2013 2012(1)
------ ----------- ---- ------ ---- ------
expansion (contraction) in basis
points
Product Cost of acquiring the
products we sell from our
suppliers, including the
impact of our sourcing
initiatives; Changes in the
mix of products sold;
Changes in the average
retail price per unit sold;
Changes in the average
retail price and related
cost of services, including
installation 210 230 300 230
Transportation International and domestic
transportation costs,
including the impact of
international container
rates; Customs and duty
charges; Fuel and fuel
surcharges; Impact of mill
shipments received directly
by our stores;
Transportation charges from
our distribution centers to
our stores; Transportation
charges between stores and
the cost of delivery to our
customers (10) 40 20 30
All Other Investments in our quality
control procedures; Warranty
costs; Changes in finishing
costs to produce a unit of
our proprietary brands;
Inventory shrink; Net costs
of producing samples (30) 90 (10) 10
Total Change in Gross Margin from the prior
year 170 360 310 270
=== === === ===
1 Certain amounts have been reclassified to conform to current year presentation
The following table sets forth components of SG&A expenses for the periods indicated, as a percentage of net sales.
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2013 2012(1) 2013 2012(1)
---- ------ ---- ------
Total SG&A
expenses 27.6% 27.4% 28.5% 28.3%
Salaries,
Commissions and
Benefits 11.9% 11.9% 12.1% 12.1%
Advertising 6.3% 6.4% 7.6% 7.2%
Occupancy 3.6% 3.6% 3.5% 3.7%
Depreciation and
Amortization 1.2% 1.2% 1.1% 1.2%
Stock-based
Compensation 0.7% 0.5% 0.6% 0.5%
Other SG&A
Expenses 3.9% 3.8% 3.6% 3.6%
1 Certain amounts have been reclassified to conform to current year presentation
SOURCE Lumber Liquidators
